SEC Proposes Rule Changes to Modernize Oil and Gas Reporting Requirements
FOR IMMEDIATE RELEASE
Washington, D.C., June 26, 2008 — The Securities and Exchange Commission today announced that it has proposed revised oil and gas company reporting requirements to help provide investors with a more accurate and useful picture of the oil and gas reserves that a company holds.
The SEC's rule proposal reflects the significant changes that have taken place in the oil and gas industry since the adoption of the original reporting requirements more than 25 years ago. The proposed rule changes incorporate improved technologies and alternative extraction methods, and enable oil and gas companies to provide investors with additional information about their reserves. The more that precise, first-hand information from oil and gas companies is available to investors and the marketplace, the less that the marketplace is forced to rely solely upon information provided by speculators.
"The ability to accurately assess proved reserves is an important part of understanding any energy company's financial position," said SEC Chairman Christopher Cox. "But the current oil and gas disclosure rules often interfere with an investor's analysis because they are tied to outdated technologies."
John White, Director of the SEC's Division of Corporation Finance, added, "I am pleased that the Commission has acted on the staff's recommended proposals to modernize the reporting requirements for oil and gas companies. The proposed rule changes will allow oil and gas companies to determine their reserves in a manner that is consistent with existing technologies. The proposed changes also will require companies to provide additional information that will allow investors to better understand the reserve quantities and the implications of those reserves on future operations. I look forward to hearing commenters' views in this regard."
The SEC's proposed rule changes include:
Permitting use of new technologies to determine proved reserves if those technologies have been demonstrated empirically to lead to reliable conclusions about reserves volumes.
Enabling companies to additionally disclose their probable and possible reserves to investors. Current rules limit disclosure to only proved reserves.
Allowing previously excluded resources, such as oil sands, to be classified as oil and gas reserves. Currently these resources are considered to be mining reserves.
Requiring companies to report the independence and qualifications of a preparer or auditor, based on current Society of Petroleum Engineers criteria.
Requiring the filing of reports for companies that rely on a third party to prepare reserves estimates or conduct a reserves audit.
Requiring companies to report oil and gas reserves using an average price based upon the prior 12-month period-rather than year-end prices, to maximize the comparability of reserve estimates among companies and mitigate the distortion of the estimates that arises when using a single pricing date.
On Dec. 12, 2007, the SEC issued a Concept Release for public comment to help determine whether changes in the reporting requirements were needed and appropriate. Comment letters received from the public were generally supportive of updating the reporting requirements to reflect the changes that have taken place in the industry, and the SEC staff considered this public input carefully when developing the recommendations for the Commission's rule proposal.
The full text of the proposing release to update disclosure requirements for oil and gas companies has been posted to the SEC Web site. Public comment on the proposed rule changes should be received by the Commission no later than 60 days after their publication in the Federal Register.